Compliance isn’t just about avoiding penalties—it’s an ongoing process. Fortunately, LegalZoom’s Compliance Filings can take some of the work off your plate.
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by Miles Almadrones
Miles is a legal writer and content marketing specialist with a background in operations management and logistics. He...
Updated on: November 1, 2024 · 9 min read
Alert: FinCEN has extended the filing deadlines to submit BOI Reports for certain reporting companies in response to some hurricanes. Check the U.S. FinCEN website to see if your company qualifies.
At its core, compliance means adhering to the laws and regulations that govern your business. However, this isn’t a one-time task you complete when you launch your business or submit an annual report. Rather, business compliance requires constant attention, action, and, sometimes, help from a professional.
Below, we’ll explain what compliance in business really means and how LegalZoom can help you avoid penalties and complications.
Many small business owners think of compliance during three primary phases: the initial business setup, when facing unexpected issues or notices, and when pursuing significant growth opportunities (e.g., entering a new market). However, the full scope of compliance obligations is often far more extensive and complex.
More specifically, compliance in business refers to the legal and industry regulations that companies must follow in order to operate. This encompasses a wide range of tasks, which can be categorized as internal or external compliance.
However, regulatory agencies don’t always make it easy to understand the compliance requirements—and potential penalties—related to your business structure and industry, whether because of complex legal jargon, scattered information across multiple sources, or changes without clear notification.
In these situations, it’s crucial to consider what you don’t know, what you’re willing and able to learn, and whether it makes more sense to get help from a professional or an online compliance service like LegalZoom.
Non-compliant businesses can run into serious consequences, regardless of the entity type or size. While the specific repercussions depend on the nature and severity of the violation, they generally fall into three main categories:
Fines are one of the most common outcomes for non-compliant businesses. Here are a few examples of potential financial penalties:
Non-compliance can sometimes lead to more severe consequences, including criminal charges against business owners. For instance, failing to follow the BOI reporting rules may result in up to two years of imprisonment. While this is typically reserved for deliberate non-compliance, it’s a risk that shouldn’t be overlooked.
As another example, construction contractors in California who operate without a license may face up to six months in jail, not to mention fines. Even worse, any unlicensed entities who contract in a state or federal natural disaster in California could face felony charges.
“Piercing the corporate veil” refers to a situation where a court disregards the limited liability protection typically provided by a corporation or LLC. In turn, the creditors or plaintiffs suing the business owners may pursue the owner’s personal assets. For example, if a small business owner purposely uses company funds for personal expenses, the court may decide to pierce the corporate veil and seize those assets to repay debts.
Needless to say, the consequences of this outcome can be severe, as the business owner may lose savings, investments, and potentially their home.
The short answer is every business needs to stay compliant. Still, the complexity and need for help depend on the company, its growth stage, and its regulatory environment. Here are a few hypothetical situations that might warrant help from a professional:
Above all, compliance isn’t a one-time event but an ongoing process, which is why many businesses seek professional help.
After more than 20 years of helping launch and maintain millions of businesses, we’ll be the first to tell you that staying compliant can be a complex and time-consuming task for any small business owner. That’s why we’ve designed our Compliance Filings plans with simplicity in mind—whether you need assistance with filing reports in your state, submitting a BOIR, or identifying which licenses and permits you need to operate.
Here’s an overview of the core services in our Compliance Filings plans (plus a few other useful additions):
State filings can broadly describe any paperwork or reports you’re required to file with the state(s) where your business operates. As discussed, failing to file required documents can result in penalties or loss of good standing, but our Compliance Filings service can help you do the following:
We’ll also keep track of upcoming deadlines and alert you as needed, ensuring you ’re never caught off guard by an unexpected filing.
In most states, it's a legal must for businesses to file ongoing reports. Typically, the state requires you to do this annually to ensure they have the latest information on your company, including its name, address, and managers.
With our Compliance Filings service, you’ll get assistance with:
If you fail to file these annual reports, your company could fall out of good standing. Companies not in good standing may risk penalties and fees, and ultimately having their entities suspended by their state.
As your business evolves, you may need to make official changes to your company’s information on record with the state. Our Compliance Filings plan includes two official changes each year with the Secretary of State (SOS), such as updating your ownership structure or business address.
As an additional service, we offer other legal forms to help with contract amendments and other document changes your business might need.
The Financial Crimes Enforcement Network (FinCEN) requires most businesses to file BOIRs, also abbreviated as BOI reports, which are meant to enhance transparency and prevent financial crimes. Here’s what we offer to help you stay compliant:
Moreover, we offer this service as part of the Compliance Filings package or as a standalone option if this is all you need.
For the most comprehensive support, we can help you identify and apply for the permits and licenses your business needs in order to operate. Here’s what comes with this package (in addition to everything previously discussed):
We also make it easy for you to reference and share business licenses directly from your account.
While not part of our Compliance Filings package, you can work with us to manage your employment legal needs, including the following:
Whether you’re hiring your first employee or managing a growing team, we’re here to help you understand employment regulations and what it takes to comply with them.
A registered agent (also known as a statutory agent in some states) is a business’ official point of contact for state and legal communications. You must have one to stay compliant, so you might consider working with us if you’re forming a new business or want to change your current agent.
Our Registered Agent Service helps ensure you never miss critical communications or deadlines, plus it comes with unlimited cloud storage for all your business documents. Keep in mind that it’s not part of our Compliance Filings service, but is a beneficial additional service that makes it easier to meet your state’s registered agent requirements.
Business owners should conduct compliance audits at least annually, though more frequent reviews (e.g., twice a year) may be necessary for rapidly growing companies or those in highly regulated industries. Regardless, regular self-assessments can help you identify potential issues before they turn into serious complications.
Common compliance issues include failing to name a registered agent, update business information with state agencies, or keep accurate records (e.g., copies of operating agreements and other important documents). Many businesses also struggle with meeting the strictest internal requirements, which is why many work with professionals to understand how to stay compliant.
While compliance involves costs, it's generally less expensive than the potential fines, legal fees, and reputation damage resulting from noncompliance. You can manage many internal requirements independently (such as holding a corporation's initial and annual director/shareholder meeting), or you can use a service with flat rates like ours to keep costs predictable.
Yes, LLCs must file an annual report in most states. Generally, you’ll need to identify your state’s requirements, gather all necessary information, and submit the report to the appropriate agency, usually the Secretary of State’s office.
Most domestic and foreign companies operating in the U.S. must file a Beneficial Ownership Information (BOI) report. Reporting companies include corporations, LLCs, and similar entities. Companies established before 2024 must file initial reports by January 1, 2025, while businesses formed in or after 2024 have 90 days after creation.
Diane Faulkner contributed to this article.
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